New rules for fund management fee disclosure revealed

A new standard for the disclosure of fees and expenses for the funds management industry, has been set and will take effect from April 1.

Friday, November 26th 2010, 6:43AM 1 Comment

ISI chairman Sean Carroll says the new format will enable investors to make better comparisons between investment products by providing consistency in terms of both layout and definitions.

"We believe the new Standard will be amongst the best of its kind internationally," says Carroll.

The standard has introduced the ‘Total Expense Ratio' (TER) model that is followed in Europe and North America.

It will require ISI members to calculate and present their fees and expenses in a standardised manner to enable investors to assess the impact of fees and expenses on their returns and compare between providers.

Carroll says a key factor of the Standard is the requirement for an illustration of how the fees and charges apply to a lump sum investment of $10,000 and an annual contribution of $1,000.

"Potential investors can immediately see the effect of the fees and charges in operation."

He says while the new standard will initially be compulsory for ISI members only, the ISI is keen for it to become the benchmark for the entire funds management industry.

"We are looking forward to working closely with Ministry of Economic Development (MED) officials to develop such an industry-wide standard."

Carroll says the development of the new industry standard began at the end of 2009 and involved significant input from many different stakeholder groups.

"We needed to deliver a process that provides investors with valuable information without imposing extra costs which investors would ultimately end up paying for in higher fees. We're confident we've managed to achieve an excellent result for everyone."

He says further initiatives to improve disclosure and reporting standards for managed funds are planned for 2011 and 2012, including the standardisation of investment performance reporting and the disclosure of portfolio holdings within a fund, as well as the separation and disclosure of adviser remuneration and management fees.

Read the full standard here

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Comments from our readers

On 27 November 2010 at 8:14 am PM said:

This is good news. The only omission from the Chairman is that he has restricted the benefit to the investing public. The major benefit will be to the Advisers who will now have much more transparency when looking at individual funds. So rather than blaming the Adviser for any underperformance of a fund it will be a little more obvious why any underperformance has occurred.